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Federal Court of Australia |
Last Updated: 16 July 1998
PRACTICE AND PROCEDURE - Group representative proceeding under Part IVA of Federal Court of Australia Act ("FCA Act") - standing of Australian Competition and Consumer Commission ("ACCC") to be representative party in such a proceeding - relationship between group proceeding under Part IVA of FCA Act and representative application by ACCC for compensatory order under subss 87 (1A) and (1B) of Trade Practices Act 1974 - meaning of "claim" and "sufficient interest" in ss 33C and 33D of FCA Act - application for order under s 33N of FCA Act that proceeding no longer continue under Part IVA of that Act - discretion to make order - matters relevant to exercise of discretion - Mareva relief - requirement of giving of usual undertaking as to damages by Crown or by instrumentality of Crown.
Federal Court of Australia Act 1976 Part IVA, ss 33C, 33D, 33N, 33ZG, 33ZH
Mareva Compania Naviera SA v International Bulk Carriers [1975] 2 Lloyd's L Rep 509 referred to
Australian Competition and Consumer Commission v Chats House Investments Pty Limited (1996) 71 FCR 250 followed
Australian Competition and Consumer Commission v Golden Sphere International Inc, unreported, FCA, 1 June 1998 followed
Bank of Western Australia Ltd v Commissioner of Taxation (1994) 55 FCR 233 applied
Ryan v Great Lakes Council (1997) 149 ALR 45 distinguished
Tropical Shine Holdings Pty Ltd v Lake Gesture Pty Ltd (1993) 45 FCR 457 considered
Boyce v Paddington Borough Council [1903] 1 Ch 109 referred to
Australian Conservation Foundation Inc v Commonwealth (1980) 146 CLR 493 referred to
Australian Competition and Consumer Commission v Shell Co of Australia Ltd (1997) 72 FCR 386 considered
Barker v Edger [1898] AC 748 considered
Royal Automobile Club of Australia Incorporating Imperial Service Club v Sydney City Council (1992) 27 NSWLR 282 considered
Wardley Australia Ltd v Ramensky [1992] FCA 557; (1992) 39 FCR 31 referred to
Council for the City of the Gold Coast v Pioneer Concrete (Qld) Pty Ltd, unreported, FCA, 9 July 1997 applied
Ryan v Great Lakes Council, unreported, FCA, 11 June 1998 applied
Securities and Investments Board v Pantell [1989] 2 All ER 673 referred to
Smith v Day (1882) 21 Ch D 421 applied
Bond Brewing Holdings Ltd v National Australia Bank (No 2) (1990) 8 ACLC 403 applied
National Australia Bank v Bond Brewing Holdings Ltd [1991] 1 VR 386 applied
F Hoffmann-La Roch e & Co AG v Secretary of State for Trade and Industry [1975] AC 295 applied
Australian Conservation Foundation Inc v Commonwealth (1980) 146 CLR 493 applied
AUSTRALIAN COMPETITION & CONSUMER COMMISSION v GIRAFFE WORLD AUSTRALIA PTY LIMITED & ORS
LINDGREN J
SYDNEY
14 JULY 1998 IN THE FEDERAL COURT OF AUSTRALIA BETWEEN: Applicant AND: First Respondent
AKIHIKO MISUMA
Second Respondent
ROBIN HAN
Third Respondent
MARK SCOTT
Fourth Respondent
RUI HUA ZHANG (AKA SUSAN ZHANG)
Fifth Respondent
LUCILLE ORR
Sixth Respondent
WEI WANG
Seventh Respondent
YONG TANG (AKA TOMMY TANG)
EightH Respondent JUDGE:
NEW SOUTH WALES DISTRICT REGISTRY NG 421 of 1998
AUSTRALIAN COMPETITIon & CONSUMER COMMISSIon
GIRAFFE WORLD AUSTRALIA PTY LIMITED
LINDGREN J DATE OF ORDER: 14 JUly 1998 WHERE MADE: SYDNEY
THE COURT ORDERS THAT:
1. The proceeding be stood over to Friday 17 July 1998 at 9.30 am for the making of orders and directions, including orders as to costs and directions for the future conduct of the proceeding.
2. The parties provide to the Associate to Lindgren J by 5.00 pm on Thursday 16 July 1998 agreed short minutes of orders and directions, or failing agreement, short minutes of the orders and directions for which they will respectively contend and outlines of submissions in support.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
|
IN THE FEDERAL COURT OF AUSTRALIA | |
| NEW SOUTH WALES DISTRICT REGISTRY | NG 421 of 1998 |
|
BETWEEN: | AUSTRALIAN COMPETITIon & CONSUMER COMMISSIon
Applicant |
|
AND: | GIRAFFE WORLD AUSTRALIA PTY LIMITED
First Respondent
AKIHIKO MISUMA Second Respondent
ROBIN HAN Third Respondent
MARK SCOTT Fourth Respondent
RUI HUA ZHANG (AKA SUSAN ZHANG) Fifth Respondent
LUCILLE ORR Sixth Respondent
WEI WANG Seventh Respondent
YONG TANG (AKA TOMMY TANG) EightH Respondent |
JUDGE:
LINDGREN J DATE: 14 JUly 1998 PLACE: SYDNEY
INTRODUCTION
By notice of motion filed 11 May 1998, the first respondent ("Giraffe World") and the third respondent ("Mr Han") move for, relevantly, the following orders:
"2. That these proceedings no longer continue under Part IVA of the Federal Court of Australia 1976 (Cth), pursuant to s.33N of that Act.
3. Further, or in the alternative, that the following paragraphs of the Application be struck out:-
a) Paragraph 5 (i); and/or
b) Paragraph 5 (ii), and/or
c) Paragraph 5 (iii).
4. Further, or in the alternative, that the Applicant provide an undertaking as to damages in respect of the orders sought in paragraphs 11, 12 and 13 of the Application."
Sub-paragraphs 5(i), (ii) and (iii) of the application referred to above are set out below. In substance they seek monetary relief on behalf of the group members other than the ACCC. Paragraphs 11, 12 and 13 of the application referred to above sought "Mareva relief" (cf Mareva Compania Naviera SA v International Bulk Carriers [1975] 2 Lloyd's L Rep 509) which I initially granted ex parte. Subsequently, Giraffe World and Mr Han and the ACCC agreed upon a Mareva régime but Giraffe World and Mr Han submit that the Mareva injunctions should be discharged if the ACCC does not give to the Court the usual undertaking as to damages. In particular, they submit that subs 80 (6) of the Trade Practices Act 1974 (Cth) ("the TP Act") has no application to a Mareva injunction because such an injunction is not an injunction "under" s 80. For its part, the ACCC submits that it should not be a condition of the granting of Mareva relief on its application that it give to the Court the usual undertaking as to damages because of a principle or practice that such an undertaking is not required of the Crown and that it is "the Crown" for this purpose.
BACKGROUND
The applicant ("the ACCC") filed its application and an accompanying statement of claim on 6 May 1998. According to par 1 of the application, the ACCC brings the application on its own behalf and as a representative party under Part IVA of the Federal Court of Australia Act 1976 (Cth) ("Part IVA" and "the FCA Act" respectively). Sections 33C, 33D and 33E in Part IVA provide as follows:
"33C (1) Subject to this Part, where:
(a) 7 or more persons have claims against the same person; and
(b) the claims of all those persons are in respect of, or arise out of, the same, similar or related circumstances; and
(c) the claims of all those persons give rise to a substantial common issue of law or fact;
a proceeding may be commenced by one or more of those persons as representing some or all of them.
(2) A representative proceeding may be commenced:
(a) whether or not the relief sought:
(i) is, or includes, equitable relief; or
(ii) consists of, or includes, damages; or
(iii) includes claims for damages that would require individual assessment; or
(iv) is the same for each person represented; and
(b) whether or not the proceeding:
(i) is concerned with separate contracts or transactions between the respondent in the proceeding and individual group members; or
(ii) involves separate acts or omissions of the respondent done or omitted to be done in relation to individual group members.
33D (1) A person referred to in paragraph 33C (1) (a) who has a sufficient interest to commence a proceeding on his or her own behalf against another person has a sufficient interest to commence a representative proceeding against that other person on behalf of other persons referred to in that paragraph.
(2) Where a person has commenced a representative proceeding, the person retains a sufficient interest:
(a) to continue that proceeding; and
(b) to bring an appeal from a judgment in that proceeding;
even though the person ceases to have a claim against the respondent.
33E (1) The consent of a person to be a group member in a representative proceeding is not required unless subsection (2) applies to the person.
(2) None of the following persons is a group member in a representative proceeding unless the person gives written consent to being so:
(a) the Commonwealth, a State or a Territory;
(b) a Minister or a Minister of a State or Territory;
(c) a body corporate established for a public purpose by a law of the Commonwealth, of a State or of a Territory, other than an incorporated company or association; or
(d) an officer of the Commonwealth, of a State or of a Territory, in his or her capacity as such an officer."
The application purports to comply with s 33H of the FCA Act by describing or otherwise identifying the "group members" to whom the proceeding relates, by specifying the nature of the claims made on their behalf and the relief claimed, and by specifying the questions of law and fact common to their claims. In relation to the first of these matters, par 2 of the application states:
2. "The Group Members to whom this proceeding relates are all persons who have suffered, or are likely to suffer, loss or damage as a result of membership [of] or participation in the `Giraffe Club' and the `Grow Rich System' (hereinafter collectively referred to as the scheme) since in or about July 1997 which scheme is described in the Schedule annexed hereto and marked `A'."
The ACCC claims that the scheme referred to involves contravention of s 57 (referral selling) and s 61 (pyramid selling) of the TP Act. On the hearing, I raised the possibility that the identification of the group members in par 2 of the application might be deficient in that it did not include the ACCC itself. It seemed to me that the representative party is necessarily one of the group of seven or more persons "on whose behalf a representative proceeding [is] commenced" (see the definition of "group member" in s 33A, and ss 33C (1) (a) and 33D (1) of the FCA Act). Senior counsel for the ACCC accepted that par 2 was deficient and sought leave to amend by including the words "the applicant and" between the words "are" and "all". While senior counsel for Giraffe World and Mr Han did not consent to the amendment, he did not put any submissions in opposition to it. The amendment would not resolve any issue debated on the hearing of the motion. I propose to allow the amendment and to deal with the motion as if the application were so amended. It will be necessary for consequential amendments to be made in par 2 of the statement of claim and perhaps elsewhere.
The scheme constituted by the "Giraffe Club" and the "Grow Rich System" referred to in par 2 of the application set out above, is described over three pages in schedule A to the application. The following is a short summary and does not represent any finding of fact. Giraffe World conducts information seminars, called "Happiness Circles", which promote an "Ion Mat" as a health product and an associated business venture. The word "Ion" is a reference to "negative ions", the word "Mat" is an abbreviation for "mattress", and the compound expression is a reference to a mattress which, when connected to a source of electricity, generates negative ions to the benefit of the person lying on the mattress. Persons can become members of the Giraffe Club only after attending such a Happiness Circle seminar and buying an Ion Mat. "The Ion Mat can be purchased for $2900.00, membership [of] the Giraffe Club costs $300.00, and a $50.00 registration fee is payable". Persons attending the seminars are informed that only if they become members of the Giraffe Club may they apply to become members of the Grow Rich System.
They are informed that membership of the Grow Rich System is conditional on certain matters, gives certain entitlements, is divided into certain classes, and gives rise to an entitlement to certain commissions. The "conditions" are attendance at, and satisfactory completion of, a "Business Class"; attendance at and satisfactory completion of a "Management Consultant Class"; and the "passing" of an interview. The "entitlements" are to introduce new people to the Giraffe Club, to receive bonus commissions from "downline agents", and to attend "higher level personal and sales technique training". The "classes of membership" are, in ascending order:
"(i) General Membership ("GM")
(ii) General Leader ("GL") obtained on recruiting 3 people to the Giraffe Club
(iii) GRA - obtained when each of GL's recruits gets 3 people to become members of the Giraffe Club
(iv) GRM
(v) GRM 3 Star
(vi) GRM 5 Star
(vii) GRM 7 Star
(viii) GRM Super Leader"
There are two types of commission payable to members of the Grow Rich System: an "achievement bonus" and an "indirect bonus". The achievement bonus is based on the recruitment of new members and is paid to the actual introducer. The indirect bonus is payable to members "up the line", as those "down the line" from them introduce new members. In addition to these two "new member commissions", there are a "reward commission" and an "additional incentive income payment". The reward commission is a percentage based on "accumulated business volume" and is calculated in accordance with a table. The additional incentive income payment is for members at the GRM level or above. There are formulae for the calculation of the various commissions.
In schedule "B" to the application, the ACCC identifies the questions of law or fact common to the claims of the ACCC itself and the Group Members as follows:
"1. The nature and operation of the scheme;
2. Whether the scheme is a scheme to which Sections 57, 61(1) or 61(2A) [these provisions are set out later] of the Trade Practices Act, 1974 (Comm.) (`the Act') applies;
3. Whether the First Respondent was a promoter and a participant in the scheme;
4. Whether the Second to Eighth Respondents inclusive were persons directly or indirectly knowingly concerned in or a party to the contraventions of Sections 57, 61(1) and 61(2A) of the Act;
5. Whether representations by the First Respondent regarding the uses and benefits of the Ion Mat were false, misleading or deceptive or likely to mislead or deceive in breach of Section 52 of the Act;
6. Whether the Second to Eighth Respondents inclusive were directly or indirectly knowingly concerned in or a party to the contravention of Section 52 of the Act;
7. Whether the representations by the First Respondent regarding the uses and benefits of the Ion Mat were in breach of Section 53(c) of the Act;
8. Whether the Second to Eighth Respondents inclusive were directly or indirectly knowingly concerned in or a party to the contravention of Section 53(c) of the Act;
9. Whether, if the Respondents contravened Sections 52, 53(c), 57, 61(1) or 61(2A) of the Act, Group Members:
(a) Are entitled to be repaid any money paid by them to or for the benefit of the First Respondent in respect of the scheme; and
(b) Are entitled to be compensated for any loss suffered as a result of participation in the scheme."
As will be apparent, the second to eighth respondents are alleged to be liable as "accessories".
According to its application, the ACCC claims on its own behalf and on behalf of the other Group Members, numerous heads of injunctive and declaratory relief, an order for corrective advertising under s 80A of the TP Act, and findings of fact for the purposes of s 83 of that Act. Importantly, however, par 5 of the application is as follows:
"The Applicant further claims on behalf of the Group Members the following orders:
(i) An order that Group Members are entitled to be repaid any money paid by them in respect of the scheme.
(ii) An order that the Group Members be paid an amount representing any loss and damage suffered or likely to be suffered as a result of participating in the scheme.
(iii) Such further order or orders as the Court considers appropriate."
Of course, the ACCC does not claim to have paid any money itself in respect of the scheme or to have suffered loss or to be likely to suffer loss as a result of participating in the scheme. (The application also claimed interlocutory relief and there is an interim regime in place which I need not discuss.)
According to the front page of the application, the sections of the TP Act under which it is brought are ss 51A, 52, 53 (c), 57, 61, 80, 80A, 83 and 87. However, as noted below, the accompanying statement of claim also refers to s 82.
Subparagraphs 3 (a), (b) and (c) of the statement of claim are as follows:
"3. For the purposes of Section 33C of the Federal Court of Australia Act, 1976:
(a) The Applicant has a claim:
(i) against each Respondent, being a claim for relief in relation to the Scheme and arising pursuant to Section 80(1)(a) of the Act; and
(ii) against the Second to Eighth Respondents pursuant to Section 80(1)(e) of the Act;
(b) Each Group Member has a claim against each Respondent:
(i) for orders pursuant to Section 87(2)(c) of the Act;
(ii) for loss and damage pursuant to Section 82 and Section 87(2)(d) of the Act;
and
(ii) for damages suffered through participation in the Scheme promoted in contravention of Sections 52, 53(c), 57, 61(1) and 61(2A) of the Act;
(c) There are more than seven (7) persons having such claim; ... "
Paragraph 9 pleads the making by Giraffe World of representations touching the supposed benefits of the Ion Mat ("the representations") and par 10 pleads that they were misleading or deceptive in the respects there mentioned. In the following three paragraphs, ss 51A, 52 and 53(c) of the TP Act are relied on. Some of the representations are alleged to have been made in a video that was screened at Happiness Circle meetings, some orally, and others in an "ion mat product manual".
Paragraph 14 pleads the making by Giraffe World of oral representations touching membership of the Giraffe Club and the Grow Rich System during Happiness Circle meetings ("the further representations") which induced persons to buy the Ion Mat and membership of the scheme. Paragraph 15 pleads that by reason of these matters, Giraffe World contravened s 57 of the TP Act (referral selling).
Paragraphs 16-21 plead facts directed to establishing contravention by Giraffe World of subss 61 (1) and (2A) of the TP Act (pyramid selling).
Paragraphs 22-28 are directed to pleading accessorial liability on the part of Mr Han and the second, fourth, fifth, sixth, seventh and eighth respondents.
Paragraphs 29, 30 and 31 of the statement of claim are as follows:
"29. The representations and the further representations were made by the Respondents with the intention of inducing members of the public, including Group Members to:
(a) enter into agreements with the First Respondent for the provision of ion mats and to participate in the Scheme;
(b) pay money to the First Respondent including monies payable pursuant to such agreements.
30. In reliance upon the representations and the further representations members of the public, including Group Members:
(a) entered into agreements with the First Respondent for the provision of ion mats and to participate in the Scheme;
(b) paid money to the First Respondent including monies payable pursuant to such agreements.
31. As a result of the matters in paragraphs 9 to 30 above the Group Members sustained loss and damage including amounts paid to the First Respondent pursuant to their respective agreements."
The statement of claim gives no particulars of the loss and damage alleged to have been suffered.
REASONING (INCLUDING OUTLINE OF PARTIES' SUBMISSIONS)
Giraffe World and Mr Han submit that the ACCC was not entitled, as representative party, to commence the present proceeding under Part IVA, and, in the alternative, that if it was so entitled, I should, as a matter of discretion, exercise the power given by s 33N of the FCA Act to order that the proceeding no longer continue under that Part.
Standing of the ACCC as representative party
The first submission challenges the correctness of the decision of Branson J in Australian Competition and Consumer Commission v Chats House Investments Pty Limited (1996) 71 FCR 250 ("Chats House") and raises an issue of general importance. Her Honour did not have the benefit of an appearance or submissions by the respondents, but held, in a considered decision, that the terms of subs 33C (1) were satisfied even though the ACCC stood in a position different from that of the other (loss suffering) group members. In the present case, the ACCC does not claim to:
"have suffered, or [be] likely to suffer, loss or damage as a result of membership [of] or participation in the `Giraffe Club' and `Grow Rich System' ... since in or about July 1997 ..." (par 2 of the application)
Similarly, the other Group Members have, I presume, no interest in seeking the injunctive relief sought by the ACCC (they lack standing to seek a corrective advertising order under s 80A of the TP Act).
Since the conclusion of the hearing before me, O'Loughlin J has followed Chats House in the present respect in Australian Competition and Consumer Commission v Golden Sphere International Inc, unreported, 1 June 1998, (QG 153 of 1996) ("Golden Sphere"). I have drawn the parties' attention to this decision and afforded them the opportunity of making submissions in relation to it. They have done so. The ACCC has relied on Golden Sphere, while Giraffe World and Mr Han have submitted that it is distinguishable.
In my view, the decisions in Chats House and Golden Sphere are not distinguishable in relation to the legal issue raised by the challenge to the ACCC's standing to be representative party and I should follow Branson J and O'Loughlin J unless I think them clearly wrong: see the authorities to which I referred in Bank of Western Australia Ltd v Commissioner of Taxation (1994) 55 FCR 233 at 255.
The Federal Court of Australia Amendment Bill 1991 will provide a new representative action procedure in the Federal Court.
The new procedure will enhance access to justice, reduce the costs of proceedings and promote efficiency in the use of court resources.
Under the Bill a person will be able to bring a proceeding on behalf of a group of persons where the claims of those persons arise out of the same, similar or related circumstances and a common question of law or fact arises with respect to all their claims.
The new representative proceeding in the Bill is based on the existing representative action procedure in the Federal Court and in State Supreme Courts.
The Bill gives the Federal Court an efficient and effective procedure to deal with multiple claims. Such a procedure is needed for two purposes. The first is to provide a real remedy where, although many people are affected and the total amount at issue is significant each person's loss is small and not economically viable to recover in individual actions.
It will thus give access to the courts to those in the community who have been effectively denied justice because of the high cost of taking action.
The second purpose is to deal efficiently with the situation where the damages sought by each claimant are large enough to justify individual actions and a large number of persons wish to sue the respondent.
The new procedure will mean that groups of persons, whether they be shareholders or investors, or people pursuing consumer claims, will be able to obtain redress and do so more cheaply and efficiently than would be the case with individual actions.
The procedure contained in the Bill has been developed following the report of the Australian Law Reform Commission entitled `Grouped Proceedings in the Federal Court' which was tabled in Parliament in December 1988.
The Government was not able to accept all the Law Reform Commission's recommendations. In particular, it has not adopted the Commission's `grouped proceedings' approach or the extension of the Federal Court's jurisdiction for such proceedings. The Commission's proposals for contingency fees and a Grouped Proceedings Assistance Fund have also not been adopted.
The Government has engaged in an extensive consultative process in preparing this Bill and has received comment from the business community and consumer and legal groups." (emphasis supplied)
This passage suggests that the Minister had in mind group members who were private persons who had suffered loss.
Second, Giraffe World and Mr Han rely upon some things said by Wilcox J in Ryan v Great Lakes Council (1997) 149 ALR 45. In that case, Mr Ryan sued on behalf of himself and other persons who had allegedly suffered injury between certain dates as a result of eating oysters from the Wallis Lakes region on the North Coast of New South Wales, which were contaminated with the hepatitis A virus. There were numerous respondents, being the Great Lakes Council, oyster farmers and oyster distributors. Mr Ryan conceded that he personally had a claim only against the Council and one oyster farmer. His Honour held that in those circumstances, on a proper construction of certain sections in Part IVA, Mr Ryan could not be a representative party on behalf of all the group members. He said (at 48):
" ... in order to utilise the Pt IVA procedure against a given respondent, the applicant must have a personal claim against that respondent that is shared by at least six other persons."
Giraffe World and Mr Han seize on the expression "personal claim" in this passage and submit that it indicates that the ACCC lacks standing to commence a representative proceeding where it does not have a "personal" claim against any of the respondents, and where the "non-personal" claim which it does have is not one "shared" by at least six other persons.
In Ryan v Great Lakes Council, Wilcox J was addressing a situation far removed from the present one. The representative party was Mr Ryan, not the ACCC. The problem was that Mr Ryan did not have, as he conceded, claims against some of the respondents, although other group members did. With respect, his Honour meant no more than that in order to commence a proceeding under Part IVA against any particular respondent, the applicant and at least six other persons must have claims against that respondent which satisfy the terms of s 33C. He was not addressing the question whether the applicant's claim must be a claim for his or her personal benefit. He did not intend to lay down that the relief sought for the representative party and for the other group members must be "shared" in the sense of being of the same kind. The latter proposition would be inconsistent with subpar 33C (2) (a) (iv). What his Honour meant by the word "shared" is, I think, explained in his judgment in Tropical Shine Holdings Pty Ltd v Lake Gesture Pty Ltd (1993) 45 FCR 457 at 462 where he said this:
"I think the only way of making sense of s 33C(1)(a) is to interpret it as restricting the use of Pt IVA to claims that, by their nature and assuming that they have substance, are shared by at least seven persons. I use the word "shared" in the sense explained by pars (b) and (c); that is, that the claims of all the persons are in respect of, or arise out of, the same, similar or related circumstances and give rise to a substantial common issue of law or fact. Interpreted in this way, the paragraph fulfils the function of weeding out cases that should clearly not be brought as representative proceedings because it is obvious that less than seven people share the claim, whilst preserving the principle embodied in s 33H."
The sentence from his Honour's judgment set out earlier does not convince me that the Chats House and Golden Sphere cases were wrongly decided in the present respect.
Third, Giraffe World and Mr Han rely on s 33P within Part IVA. That section provides:
"33P Where the Court makes an order under section 33L, 33M or 33N that a proceeding no longer continue under [Part IVA]:
(a) the proceeding may be continued as a proceeding by the representative party on his or her own behalf against the respondent; and
(b) on the application of a person who is a group member for the purposes of the proceeding, the Court may order that the person be joined as an applicant in the proceeding." (emphasis supplied)
In my view s 33P is not persuasive one way or the other in relation to the present issue. To my mind, the words "on his or her own behalf" do not, in this section, necessarily signify that a representative party must be a person who has a beneficial interest in the outcome of the proceeding generally or of his or her claim in particular. The words are, however, clearly taken from s 33D (1) set out earlier and discussed below.
Fourth, Giraffe World and Mr Han rely on s 33E of the FCA Act. That section provides as follows:
"33E (1) The consent of a person to be a group member in a representative proceeding is not required unless subsection (2) applies to the person.
(2) None of the following persons is a group member in a representative proceeding unless the person gives written consent to being so:
(a) the Commonwealth, a State or a Territory;
(b) a Minister or a Minister of a State or Territory;
(c) a body corporate established for a public purpose by a law of the Commonwealth, of a State or of a Territory, other than an incorporated company or association; or
(d) an officer of the Commonwealth, of a State or of a Territory, in his or her capacity as such an officer."
Giraffe World and Mr Han submit that s 33E indicates that the entities mentioned in subs (2) can be group members only if they are involved in the same capacity as other group members. I do not accept the submission. The section does not indicate that the entities mentioned, such as a loss suffering Commonwealth officer, cannot be a representative party. Once it is accepted that they can be, subs 33C(2) set out earlier makes it clear that it is not an obstacle to the commencement of a representative proceeding under Part IVA that the relief sought differs as between group members, for example, as between an entity mentioned in subs 33E (2) and other group members. If anything, the existence of s 33E indicates that the persons and institutions listed would otherwise be in no different position to any other person who came within the definition of the group. It follows that, in the absence of any provision to the contrary, such persons or institutions could likewise be representative parties in the same way as any other person. Giraffe World and Mr Han do not submit that the ACCC did not give "written consent to being a group member" in the present case and is, for that reason, not a group member (see O'Loughlin J's discussion of this issue in Golden Sphere at 34-35).
Notwithstanding the foregoing, I doubt that the ACCC is entitled to act as a representative party under Part IVA where it has no interest of its "own" to protect and has only statutory standing to apply for a remedy which will protect a public interest. The reason is that I doubt that in such circumstances the ACCC has a "claim" against the respondent for the purposes of par 33C (1) (a) of the FCA Act.
As to the meaning of "claims" in par 33C (1) (a), certain matters are tolerably clear.
First, the claims must be claims recognised by the law.
Second, subpar 33C (2) (a) (i) shows that a claim for discretionary equitable relief qualifies, and, therefore, that the "claims" to which par 33C (1) (a) refers are not confined to claims to relief as of right.
Third, whatever the word "claims" in the provision denotes, they have an existence independent of, and antecedent to, the commencement of the proceeding, since it is only if seven or more persons have claims against the same person that a proceeding under Part IVA may be commenced by one or more of them. Perhaps this signifies that it is not a sufficient condition of the existence of a claim that a claim has been "made", "asserted" or "threatened".
Fourth, for obvious reasons, par 33C (1) (a) does not speak of a "right" or "entitlement" to relief - a matter which cannot be known until a final hearing.
Fifth, it is not required that the persons who have the claims be aware that they have them, let alone that they have asserted them.
In Golden Sphere, O'Loughlin J said (at 27):
"I am of the opinion that the ACCC has a right to institute proceedings and, in that sense, has a claim against each of the respondents."
However, with respect, it seems to me that the word "claim" is at least arguably related to the "sufficient interest to commence a proceeding on his or her own behalf" to which s 33D (1) refers. That expression seems to invoke a concept similar to the "special interest" test of standing applied to private suits for injunctions in aid of public rights; cf Boyce v Paddington Borough Council [1903] 1 Ch 109 at 114 and Australian Conservation Foundation Inc v Commonwealth (1980) 146 CLR 493 at 527, 528 (Gibbs J). I think that the having of a "claim" to which par 33C (1) (a) refers and the having of a "sufficient interest" on one's own behalf to which subs 33D (1) refers, are notions which are not apt to catch simply being "any person" authorised by such provisions as s 80 of the TP Act to seek injunctive relief to enforce statutory provisions enacted in the public interest.
As is well known, under s 80 of the TP Act, where a person has engaged or is proposing to engage in conduct that constitutes a contravention of a provision of Part IV, IVA or V of that Act, the Court may grant an injunction on the application of the ACCC "or any other person". If this statutory locus standi is a "claim" for the purposes of par 33C (1) (a), the whole world has "claims" against the contravener or intending contravener, and any one person in the world is authorised by subs 33C (1) to commence a proceeding on his or her own behalf and on behalf of all other persons in the world. It may be suggested in answer that this is so, but that if such injunctive relief were the only relief claimed, "all the relief sought [could] be obtained by means of a proceeding other than a representative proceeding under [Part IVA]" (par 33N (1) (b)) with the result that the Court would order that the proceeding no longer continue under Part IVA. But this does not dispose of the difficulty because not only the ACCC but also "any other person", albeit one who makes no claim to have suffered loss, would, by reason of the locus standi accorded by s 80 of the TP Act, be entitled to commence a representative proceeding seeking not only injunctive relief but, as well, compensatory relief on behalf of loss sufferers.
In my view, the preferable construction of par 33C (1) (a) and subs 33D (1) is that a statutory locus standi of the kind given by s 80 of the TP Act, by itself and without more, lies outside those provisions. This view is consistent with the Second Reading Speech set out earlier which evinced an intention that Part IVA would be used by persons who brought proceedings to prevent, or obtain relief for, loss or damage to their own interests and the interests of other group members, rather than by persons who sought only to protect public interests and whose private interests had not been specially affected at all.
The view which I have expressed differs from that of Branson J and O'Loughlin J. But their Honours' view is, with respect, not plainly wrong and may be accepted by a Full Court in preference to my own. Therefore, I will follow it.
A further submission made in Australian Competition and Consumer Commission v Internic Technology Pty Ltd (NG 395 of 1998)
On 26 May 1998, subsequent to the hearing on 21 May of the present motion, I heard a motion by the respondents (Internic Technology Pty Ltd) ("IT") and Peter Marek Zmijewski ("Zmijewski") in an unassociated proceeding, Australian Competition and Consumer Commission v Internic Technology Pty Ltd (NG 395 of 1998), also for an order under s 33N of the FCA Act. On that motion, IT and Zmijewski submitted that a representative proceeding by the ACCC under Part IVA for relief under s 87 of the TP Act is incompetent because of the terms of that section. For convenience, I will deal with that submission in these Reasons.
IT and Mr Zmijewski submit that a representative action under Part IVA for relief under s 87 of the TP Act on behalf of group members is incompetent. They submit that the maxim generalia specialibus non derogant applies, with the result that the ACCC may not make an application for relief pursuant to subs 87 (1A) of the TP Act on behalf individuals who have suffered loss, unless it complies with subs 87 (1B). Subsections 87 (1), (1A), (1B) and (1C) of the TP Act are, and were when Part IVA was introduced into the FCA Act in 1991, as follows:
"87 (1) Without limiting the generality of section 80, where, in a proceeding instituted under, or for an offence against, this Part, the Court finds that a person who is a party to the proceeding has suffered, or is likely to suffer, loss or damage by conduct of another person that was engaged in (whether before or after the commencement of this subsection) in contravention of a provision of Part IV, IVA or V, the Court may, whether or not it grants an injunction under section 80 or makes an order under section 80A or 82, make such order or orders as it thinks appropriate against the person who engaged in the conduct or a person who was involved in the contravention (including all or any of the orders mentioned in subsection (2) of this section) if the Court considers that the order or orders concerned will compensate the first-mentioned person in whole or in part for the loss or damage or will prevent or reduce the loss or damage.
(1A) Without limiting the generality of section 80, the Court may, on the application of a person who has suffered, or is likely to suffer, loss or damage by conduct of another person that was engaged in (whether before or after the commencement of this subsection) in contravention of a provision of Part IVA or V or on the application of the Commission in accordance with sub-section (1B) on behalf of such a person or 2 or more such persons, make such order or orders as the Court thinks appropriate against the person who engaged in the conduct or a person who was involved in the contravention (including all or any of the orders mentioned in sub-section (2)) if the Court considers that the order or orders concerned will compensate the person who made the application, or the person or any of the persons on whose behalf the application was made, in whole or in part for the loss or damage, or will prevent or reduce the loss or damage suffered, or likely to be suffered, by such a person.
(1B) Where, in a proceeding instituted for an offence against section 79 or instituted by the Commission or the Minister under section 80, a person is found to have engaged (whether before or after the commencement of this subsection) in conduct in contravention of a provision of Part IVA or V, the Commission may make an application under subsection (1A) on behalf of one or more persons identified in the application who have suffered, or are likely to suffer, loss or damage by the conduct, but the Commission shall not make such an application except with the consent in writing given before the application is made by the person, or by each of the persons, on whose behalf the application is made.
(1C) An application may be made under subsection (1A) in relation to a contravention of Part IVA or V notwithstanding that a proceeding has not been instituted under another provision of this Part in relation to that contravention." (emphasis supplied)
There is a substantial history to these provisions. When the TP Act was enacted in 1974, s 87 contained subss (1) - (5). Subsection (1) provided that where, in a proceeding under or for an offence against Part VI, the Court found that there had been a contravention of Part IV or Part V, the Court might, in addition to making certain other "principal" orders:
"make such other orders as it thinks fit to redress injury to persons caused by any conduct to which the proceeding relates or any like conduct engaged in by the defendant."
Subsection (2) provided that these orders included, but were not limited to, the orders set out in that subsection.
The "persons" referred to in subs (1) did not need to be parties. It was argued, although not decided, in Trade Practices Commission v Milreis Pty Ltd (1977) 29 FLR 144, that the provision was constitutionally invalid because it purported to invest the Court with non-judicial power. The section was amended by the Trade Practices Amendment Act 1977 (Act No 81 of 1977) which, relevantly, substituted a new subs (1) and inserted a new subs (1A). The effect of the amendments was that the compensation orders were available only to loss sufferers who either (a) were parties to a proceeding instituted under, or for an offence against, Part VI (subs 87 (1)), or (b) applied for such orders (subs 87 (1A)).
Section 87 was amended substantially by the Trade Practices Revision Act 1986 (Act No 17 of 1986). That Act omitted subs (1A) and substituted new subss (1A) - (1E). The effect of the amendments was to empower the Court to make compensation orders for the benefit of loss sufferers, not only where they were parties or applied for such orders, but also in a principal proceeding brought by the ACCC's predecessor, the Trade Practices Commission ("TPC").
In the result, "loss sufferers" might apply for a compensatory order subject to being a party or applying for the order, and the TPC might apply for such an order on their behalf although they were not parties, but subject to three constraints expressed in subs (1B): first, the application may be made only in a "principal" proceeding instituted for an offence against s 79 or instituted by the TPC or the Minister for injunctive relief under s 80; second, those loss sufferers must be identified in the Commission's application for a compensatory order made on their behalf; and, third, the TPC must have the written consent of the loss sufferers to the making of the application by the TPC on their behalf (an "opt in" form of representative action).
Clearly, the legislative policy was that compensatory orders should be available only for the benefit of loss sufferers who were willing to be identified as such, either by being parties, or by consenting in writing to have the TPC apply for a compensatory order on their behalf. Both the Second Reading Speech and the Explanatory Memorandum relating to the Trade Practices Revision Bill 1986 emphasised that the proposed amendments did not introduce a "class action" (see C of A Parl Debs, Weekly Hansard, 19 March 1986; Explanatory Memorandum, pars 188-192 addressing cl 55 of the Bill).
Subsections 87 (1A) and (1B) were considered by Drummond J in Australian Competition and Consumer Commission v Shell Co of Australia Ltd (1997) 72 FCR 386. His Honour held that the finding of a contravention of Part IVA or Part V must be made before the application on behalf of the persons who have suffered or are likely to suffer loss or damage is made. For this reason, a claim on behalf of such persons cannot be made in the originating application under which an order under s 80 is sought (or in which an offence against s 79 is alleged). However, his Honour did say that this does not have the effect that an application under subs 87 (1A) may be made only by the commencement of a fresh proceeding by the ACCC after it has established a breach of Part IVA or V in a prior proceeding. Rather, the ACCC may make the application for compensatory orders in due course by motion in the proceeding in which relief under s 80 has been sought or an offence against s 79 has been prosecuted, and in which the finding of contravention has been made.
IT and Mr Zmijewski draw attention to ss 33ZG and 33ZH of the FCA Act. Section 33ZG provides, relevantly, that:
"[e]xcept as otherwise provided in this Part, nothing in this Part affects:
...
(c) the operation of any law relating to:
...
(ii) proceedings of a representative character; ...".
IT and Mr Zmijewski submit that this provision expressly preserves the operation of subs 87 (1A) of the TP Act in so far as it relates to the ACCC, and denies to the ACCC the power to commence a representative proceeding on the "opt out" basis afforded by Part IVA as opposed to the "opt in" basis provided for in subss 87 (1A) and (1B). They refer to pars 51 and 52 of the Explanatory Memorandum relating to s 33ZG which were as follows:
"51 This section reflects the fact that while the new Part provides a new procedure for bringing and conducting a representative proceeding, it does not change existing laws that apply generally to proceedings in the Federal Court unless those changes are provided for in Part IVA.
52 The section makes it clear that the new Part does not affect the commencement or continuance of any other representative action in the Court, for example, under the Trade Practices Act 1974 or under the Court's current representative action procedure."
They submit that this position is not affected by s 33ZH of the FCA Act, which provides:
"(1) For the purposes of subsection 87(1) of the Trade Practices Act 1974, a group member in a representative proceeding is to be taken to be a party to the proceeding.
(2) An application under subsection 87(1A) of the Trade Practices Act by a representative party in a representative proceeding is to be taken to be an application by the representative party and all the group members."
IT and Mr Zmijewski submit as follows:
"4. Section 33ZH operates by reference to applicants under sections 87(1) and 87(1A) who are not the ACCC. It is well recognised that because of section 87(1B), section 87(1A) has a quite different field of operation in respect of the ACCC than it does for a private litigant: see ACCC v Shell (1997) 72 FCR 386 at 392 per Drummond J. A private litigant can bring a claim under 87(1A) without the need to bring any ancillary proceedings: 87(1C). But the ACCC can only bring a claim under 87(1A) in connection with a proceeding seeking orders pursuant to sections 79 or 80.
5. Just as the Federal Court Act requires the written consent of the ACCC if it is to be a group member (section 33E(2)(c)) the Federal Court Act leaves the position whereby the ACCC requires the written consent of a group if it is to lead in representative proceedings. There is a sound policy reason for the ACCC being in a different position than a private litigant in this regard. The assistance of individuals, though significant, "is incidental to the regulatory purposes of the provisions": see ALRC Report No. 46, "Grouped Proceedings in the Federal Court" at para 36. Also the "opt in" provisions make it likely that the ACCC will only act on behalf of those individuals who claim to have acted in reliance on the conduct allegedly in contravention of Part V."
IT and Mr Zmijewski submit that the reasoning of Branson J in Chats House is based on authorities dealing with the existence of specific and general provisions in the same statute, but that the appropriate question where a specific provision in an earlier statute is amended or repealed by a general provision in a later one, is whether the maxim generalia specialibus non derogant applies. They refer to Barker v Edger [1898] AC 748 at 754 in which the Privy Council described the operation of the maxim as follows:
"When the Legislature has given its attention to a separate subject, and made provision for it, the presumption is that a subsequent general enactment is not intended to interfere with the special provision unless it manifests that intention very clearly. Each enactment must be construed in that respect according to its own subject-matter and its own terms."
IT and Mr Zmijewski submit that the maxim applies here to prevent the procedures of general application introduced in 1991 by Part IVA from derogating from the earlier grant of specific but conditional jurisdiction in s 87 of the TP Act, with the result that it was beyond the power of the ACCC to commence a proceeding such as the present one without the prior written consent of the persons on whose behalf it applied for compensatory orders.
It has been said that the operation of the maxim is "rarely so simple" as the passage quoted from Barker v Edger suggests: Associated Minerals Consolidated Ltd v Wyong Shire Council [1974] 2 NSWLR 681 at 686; [1975] AC 538 at 553. In Royal Automobile Club of Australia Incorporating Imperial Service Club v Sydney City Council (1992) 27 NSWLR 282 (CA) at 292-7, Kirby P, as his Honour then was, set out a number of principles which were said to emerge from the decisions relating to the maxim generalia specialibus non derogant, including the following:
"Respectful of the law made by Parliament, courts will not readily assume that words of apparently general application are to be narrowly confined: see Fullagar J in Butler v Attorney-General for the State of Victoria [(1961) [1961] HCA 32; 106 CLR 268] (at 276). It is for the party seeking to confine such words to show that this is necessary to avoid an irreconcilable inconsistency or repugnancy between the statutory duties said to be in conflict: see, eg, Goodwin v Phillips [1908] HCA 55; (1908) 7 CLR 1 at 11. There must be such conflict that the words necessarily `import a contradiction': see Garnett v Bradley (1878) 3 App Cas 944 at 966; Rose v Hvric [1963] HCA 13; (1963) 108 CLR 353 at 360; Parramatta City Council v Stauffer Chemical Co (Aust) Pty Ltd [1971] 2 NSWLR 500 at 509;
....
In the absence of express repeal of earlier or other statutory provisions, it will normally be presumed that Parliament intended the two statutes to work harmoniously together so that each operates within its respective field of application: see Hack v Minister for Lands (New South Wales) [1905] HCA 37; (1905) 3 CLR 10 at 23; Maybury v Plowman [1913] HCA 43; (1913) 16 CLR 468 at 473, 480; Lukey v Edmunds (1916) 21 CLR 336 at 341, 352; Bank Officials' Association (South Australian Branch) v Savings Bank of South Australia [1923] HCA 25; (1923) 32 CLR 276 at 288; South-Eastern Drainage Board (South Australia) v Savings Bank of South Australia [1939] HCA 40; (1939) 62 CLR 603 at 626; Trade Practices Commission v BP Australia Ltd [1985] FCA 391; (1985) 7 FCR 499 at 506-7; [1985] FCA 391; 62 ALR 151 at 158. To invoke the maxim it is essential that it should be shown that `effect cannot be given to both provisions at the same time', for otherwise such effect must be given out of deference to the imputed will of Parliament: Kutner v Phillips [1891] 2 QB 267 at 272; Hack v Minister for Lands (New South Wales) (at 23f); Hill v Hall (1876) 1 Ex D 411 at 413, 414; Flannagan v Shaw [1920] 3 KB 96.
....
In giving meaning to the language used by Parliament in succeeding statutory provisions, the court will not look to hypothetical or possible conflicts. Legislation being concerned with the highly practical business of lawmaking, the issue in every case of a suggested conflict will be the practical ways in which the legislation operates together and whether, in that context, an irreconcilable conflict of duties really arises. In answering this question it is relevant to consider whether one of the statutes applies to a special class or subject matter whereas the other applies to a more general or wider subject matter: see Associated Minerals Consolidated Ltd v Wyong Shire Council (ibid at 686-687; 554); cf Sarris v Penfolds Wines Pty Ltd [1963] SR (NSW) 10; 79 WN (NSW) 601; Sydney City Council v Paul Dainty Corporation Pty Ltd [1984] 3 NSWLR 104 at 107; see also SGG Edgar, Craies on Statute Law, 7th ed (1971) at 377ff."
IT and Mr Zmejewski submit that effect cannot be given to subs 87(1B) of the TP Act, which requires prior consent, and Part IVA, which does not require consent, at the same time.
Under the TP Act, the ACCC cannot enforce the remedies given to loss sufferers by s 82 of that Act; its only right to apply for recovery of compensation on their behalf is that given by s 87 (1A) subject to s 87 (1B). As noted earlier, the first condition of that right to apply is that there must be a proceeding instituted for an offence against s 79 or a proceeding instituted by the ACCC for an injunction under s 80. On the private institution of proceedings for an offence against s 79 there are severe restrictions, designed to ensure control by the authorities: see s 163 of the TP Act. In substance, the first condition to which I have referred is that a proceeding must have been instituted by or with the approval of public authorities and to protect the public interest, before the ACCC is entitled to apply on behalf of loss sufferers for a compensatory order. The second and third conditions require the identification and written consents of the loss sufferers. In the present proceeding, the ACCC seeks to invoke its role as protector of the public interest and the general procedures introduced by Part IVA of the FCA Act, thereby obviating the need to satisfy the second and third conditions. I incline to the view that a construction of Part IVA which permits this to occur is one which would "affect" the operation of a law relating to a proceeding of a representative character, within the meaning of s 33ZG.
Section 33ZG evinces a legislative intention as to how Part IVA is to be construed. It is to be construed so that, relevantly, it does not affect the representative proceeding procedure established by s 87 of the TP Act. If the expression "representative party" in s 33ZH(2) includes the ACCC and so allows the ACCC to commence a proceeding on behalf of others otherwise than "in accordance with" s 87 (1B), the representative procedure established by s 87 of the TP Act would be radically affected: the ACCC would not be limited to making the application in a proceeding already instituted for an offence against s 79 or instituted by the ACCC or the Minister under s 80, in which a finding of contravention has been made; the loss sufferers would not have to be identified in the ACCC's application; and their prior written consent would not be necessary.
Although s 33ZG commences "[e]xcept as otherwise provided by this Part", s 33ZH does not provide otherwise in the present context. Subsection 33ZH (1) commences "For the purposes of subsection 87 (1)" and subs 87 (1) is activated only where "the Court finds that a person who is a party to the proceeding" has suffered, or is likely to suffer, loss or damage ...". In the circumstances with which we are concerned, subs 87 (1) is not activated because the ACCC is not a party which has suffered or is likely to suffer loss or damage.
Subsection 33ZH (2) is able to operate in the case where a representative party's claim is for its own benefit and in respect of its private interests. The ACCC cannot claim relief on its "own" behalf in this sense under subs 87 (1A): it can apply only on behalf of 2 or more other persons who have suffered loss or damage. There would be no point in s 33ZH (2)'s deeming such an application to be made, not only by the ACCC but also by all the group members, because it would avail the group members nothing to be parties to an application which is already one made on behalf of other persons.
Section 33ZH is conformable to my construction of the expressions "claims" and "sufficient interest" in ss 33C (1) (a) and 33D to which I referred earlier. A loss sufferer can pass through the doorway to subs 87 (1) by being a person who institutes a proceeding under Part VI, for example, for an injunction under s 80 or for recovery of the amount of the loss or damage under s 82. By virtue of having suffered loss or damage, the person would also have a "sufficient interest to commence a proceeding on his or her own behalf" and would have a "claim" and therefore be authorised by ss 33C and 33D of the FCA Act, to commence, as representative party, a proceeding under Part IVA. Subsection 33ZH (1) would have the effect that all other loss suffering group members would be taken to be "parties" also for the purpose of subs 87 (1), that is, for the purpose of being entitled to apply for compensatory orders after the Court makes a finding of contravention. Similarly, not only would such a loss suffering representative party, but so also would all other loss suffering group members, be treated as "originating applicants" for compensatory orders under subs 87 (1A).
Notwithstanding the above, the alternative view is available that the two procedures are capable of standing together. This view emphasises that the effect of subss 87 (1A) and (1B) is to create a new right in the ACCC where none previously existed and that Part IVA creates a new right in any person to bring proceedings on behalf of others as well as on his or her own behalf. On this view, the effect of the two schemes is simply to give the ACCC the choice of either (a) acting as a representative ab initio for all persons who have suffered loss under Part IVA, or (b) waiting until a finding of contravention of liability has been made and then, subject to identifying and obtaining the written consent of loss sufferers, applying for compensatory orders on their behalf. Although the ACCC may be more likely to choose the former course because of its "opt in" nature, it does not follow that the two legislative schemes themselves are incompatible. But even consistently with this view, the availability of the procedure under subss 87 (1A) and (1B) is relevant to the exercise of the Court's discretion under s 33N. The Court may consider it appropriate that a proceeding continue as one by the ACCC under subss 87 (1A) and (1B) of the TP Act, rather than under Part IVA of the FCA Act.
In sum, I am not persuaded by the further submission of IT and Zmijewski to think that Chats House and Golden Sphere were plainly wrong in the respect in question. Accordingly, I proceed on the basis that the ACCC had a claim against the respondents immediately prior to the commencement of the proceeding on 6 May 1998 and had standing to commence a representative proceeding under Part IVA.
Discretion
Giraffe World and Mr Han submit that I should make an order pursuant to subs 33N (1) of the Act that the proceeding no longer continue under Part IVA. Section 33N provides:
"(1) The Court may, on application by the respondent or of its own motion, order that a proceeding no longer continue under this Part where it is satisfied that it is in the interests of justice to do so because:
(a) the costs that would be incurred if the proceeding were to continue as a representative proceeding are likely to exceed the costs that would be incurred if each group member conducted a separate proceeding; or
(b) all the relief sought can be obtained by means of a proceeding other than a representative proceeding under this Part; or
(c) the representative proceeding will not provide an efficient and effective means of dealing with the claims of group members; or
(d) it is otherwise inappropriate that the claims be pursued by means of a representative proceeding.
(2) If the Court dismisses an application under this section, the Court may order that no further application under this section be made by the respondent except with the leave of the Court.
(3) Leave for the purposes of subsection (2) may be granted subject to such conditions as to costs as the Court considers just."
Were there at least six other persons who had claims against Giraffe and Mr Tan immediately prior to the commencement of the proceeding on 15 May 1998?
I have been troubled by the question whether, on the existing evidence, there are even six other persons who have a claim against Giraffe and Mr Tan as required by par 33C (1) (a) of the Act. The ACCC has led evidence that only one member of the Giraffe Club and the Grow Rich System and her husband have complained. Their affidavit evidence repays attention because of its relevance to what I will say below.
According to her affidavit sworn 4 May 1998, Mrs Lining Gong was introduced to the Giraffe Club and the Grow Rich System by a friend of hers, Shirley Guan. Ms Guan said to her:
"I have been using a negative ion mat. It can cure your pimples and also earn you money. We should arrange to meet again and talk."
They arranged to meet again. When her husband learned of the arrangement, he said to her "[d]on't get trapped". Ms Gong attended a "Happiness Circle" meeting. She states:
"At the end of the presentation I was left with the impression that this was a big Taiwan Company and I was very excited. I wanted to join because I thought it would cure my pimples. The mat was supposed to be very good. I thought that it was a very good business and very easy to do because you just introduce three friends and because I only had to invest $3,200 and I could make some money."
After the meeting, Ms Gong signed a "Membership Application and Agreement" form and received an invoice issued by Giraffe World for $3,200, including $2,900 for the "Mattress", $50 for the "Membership Application" and $250 for "MCC". The abbreviation "MCC" refers to "Management Consultant Class". Ms Gong attended a "Business School" and a "Management Consultant Class".
Ms Gong's husband, Qi Zhu Tan has also sworn an affidavit dated 4 May 1998. He deposes to a conversation which he had with his wife's friend, Shirley Guan about Giraffe World and the ion mat at or about the end of August or the start of September 1997. He was sceptical. He disputed the efficacy of the mat and questioned the charge of a sum so large as $3,000. He asked what was the manufacturing cost of the mats, to which Ms Guan replied:
"Roughly 5% of the price, but I am just estimating."
Mr Tan told Ms Guan that he was not interested. He states that on 4 November, his wife brought home an Ion Mat telling him that she had borrowed it from Ms Guan "to try it for one month". However, on or about 18 November 1997, he discovered that some $1,700 of money which he and his wife had put aside was missing. His wife was not home at the time and he telephoned Ms Guan who said that his wife had not borrowed the mat but bought it. Their conversation included the following exchange:
Ms Guan: "Your wife has a right to make an independent decision."
Mr Tan: "You do this business very successfully - you have broken my family."
Perhaps not unexpectedly, there was, in due course, an argument between husband and wife in which Ms Gong said:
"This is business. The reason that I did not let you know is because you in the very beginning had already rejected this business. My intention was to wait until I earned the money from this business. Then I would have let you know the truth."
Mr Tan states that his wife "is normally very indecisive" and this caused him to become interested to find out more about the activities of Giraffe World. He attended a "Happiness Circle" seminar and gives an account of what he observed. According to his affidavit, Mr Han said to those present:
"If you join this club, this business that you will be doing will be very different from any other business that you could be doing. There are many risks in other businesses, but in this business you will not experience that much risk. At this stage many people have joined this business. If you want to join this business be quick. Otherwise, if you join this business when many people have joined, your business prospects will not be that good."
Mr Tan complained to the Consumer Claims Tribunal but according to his affidavit he "was unsuccessful". His affidavit does not elaborate on this statement. He was also unsuccessful in persuading Giraffe World to refund the amount which his wife had paid.
There is no evidence of the "value" of the Ion mat. In the course of correspondence between Blessington Judd, the solicitors for Giraffe World and Mr Han, and the ACCC, Blessington Judd forwarded to the ACCC two documents which, they contended, showed that it had commercial value. The first was a "Certificate of Suitability" No. 7039 issued by the New South Wales Department of Fair Trading on 2 December 1997. However, the certificate was only to the effect that the Ion Mat was acceptable to the Department of Fair Trading as "suitable for connection to public electricity supply in New South Wales in accordance with the provisions of AS 3000.....". The other document was a notification dated 17 March 1998 issued by the Therapeutic Goods Administration of the Commonwealth Department of Health and Family Services. The notification was of the fact that the "GIRAFFE WORLD ION MAT manufactured by DAIWA MISAKI CO LTD" was considered to be "an excluded good being of the type as defined under the Therapeutic Goods (Excluded Goods) Order No. 1 of 1998, Clause 3 Item (k) of the Schedule". Item (k) was then set out in the notification as follows:
"(k) non-implantable devices, equipment or apparel intended for use in: improving comfort, enhancing relaxation, exercising or improving physiological fitness, modifying anatomical physique, improving appearance, muscle or skin tone, easing minor aches and pains, fatigue or tiredness (due to normal ageing or day to day activities), or stimulating circulation (via exercise or the application of heat or massage)."
The notification concluded by advising that because the product was considered to be an excluded good of the kind mentioned, it was "not subject to the controls of the Therapeutic Goods Act and Regulations". Again, while the notification says something about the intended use, it says virtually nothing as to its value.
Whereas, according to par 3 (a) of the statement of claim, the ACCC is said to have had a claim for injunctive relief under s 80 of the TP Act, according to par 3 (b), the claims of the other Group Members are for orders under par 87 (2) (c) of the Act for refund of money paid; for orders under ss 82 and 87 (2) (d) for payment of the amount of loss or damage suffered; and for "damages suffered through participation in the scheme promoted in contravention of" ss 52, 53 (c), 57, 61 (1) and 61 (2A) of the TP Act. Although the nature of this third class of claim is not perfectly clear, it is plain that all three classes require that the Group Members in question should have suffered loss or damage.
In the present case, Group Members bought goods and a business opportunity. The question thus arises whether, as a result of having done so, they had suffered loss as at 6 May 1998 when the proceeding was commenced. As noted above, the evidence reveals a complaint by only one member of the Giraffe Club and the Grow Rich System, Ms Lining Gong, and it is not clear that she had suffered loss as at 6 May. As Giraffe World and Mr Tan point out, it may be safely presumed that the second to eighth respondents are members of the Giraffe Club and the Grow Rich System and have suffered no loss and damage - they certainly do not claim to have done so.
At this stage, because of the nature of the transaction and of the business opportunity acquired, it is not clear whether any or many members of the Giraffe Club and the Grow Rich System had suffered loss or damage when the ACCC commenced the proceeding. So long as the business continues, the business opportunity which they purchased still exists. It is arguable that members of the scheme will suffer no loss unless and until the Court restrains Giraffe World from continuing to operate the scheme. There is no evidence of how much money has been earned by members.
If there were not at least six persons who had suffered loss or damage as at 6 May, the ACCC was not entitled to commence the proceeding as a representative proceeding under Part IVA. Even if it were possible to say that were at least six such persons, it is not possible to say whether there were few or many loss sufferers at that time. Consider further the position of a member who has earned and been paid commissions exceeding the sum of $3,250 outlaid initially and assume that the scheme is ultimately found to have contravened s 67 of the TP Act. Will that member have suffered loss, and if so, on what basis and when? The uncertainty touching the issues to which I have referred is a factor which militates in favour of the making of an order under s 33N, in my opinion.
The ACCC is not seeking, relevantly, orders that would prevent likely loss to group members; rather, it seeks orders to compensate persons for actual loss suffered. The situation is not saved, therefore, by the use of the expression "a person who ... is likely to suffer loss or damage" in subs 87 (1A) of the TP Act. That expression gives the Court power to grant relief in the nature of a quia timet injunction: Wardley Australia Ltd v Ramensky [1992] FCA 557; (1992) 39 FCR 31 at 43. It does not authorise the making of an application seeking compensation for loss or damage before it is suffered.
Other matters
In relation to par (a) of subs 33N (1), Giraffe World and Mr Tan submit that the maximum possible loss for any group member is $3,250, and that any dissatisfied member could pursue his or her own claim in the Small Claims Tribunal, thereby eliminating the greater cost associated with a Federal Court Proceeding. Paragraph (a) of subs 33N (1) requires one to hypothesise that each Group Member conducts a separate proceeding. The ACCC is a Group Member. How many other Group Members are there? As previously indicated, I do not know that there are any. But I am required to assume for the present that the proceeding was properly commenced, that is to say, that the ACCC and at least six loss sufferers are Group Members. For the purpose of par (a), I proceed on the assumption that the ACCC continues the present proceeding for relief under ss 80 and 80A and that at least six other Group Members conduct separate proceedings, each for recovery of $3,250 or less. The costs which would be incurred on the (minimum of) seven proceedings would exceed the costs that would be incurred if the present proceeding continued under Part IVA, because, under the former régime, many matters would need to be established seven times in separate courts, such as the value of the Ion Mat and the illegality of the scheme. As I have said elsewhere, the policy of Part IVA is that respondents should not benefit from the fact that individual claims are relatively small and that many group members might not consider it worth their while to litigate them on their own initiative: Ryan v Great Lakes Council, unreported, FCA, 11 June 1998.
Next, Giraffe World and Mr Han submit that that no general resolution is possible in this case, because individuals were induced to purchase the Ion Mat and join the Giraffe Club and the Grow Rich System on separate occasions, with the result that their individual claims must be separately considered. They submit, therefore, that a proceeding under Part IVA does not provide "an efficient or effective means of dealing with the claims of group members" (par 33N (1) (c)).
I am not sure that it is correct to say that evidence will need to be led by each Group Member to establish that the representations and the further representations were made to, and relied upon by, him or her. From the evidence I have seen to date about the way in which the scheme operates, the statements as to the qualities of the Ion Mat and as to the nature of the scheme can be expected to be similar in most if not all cases. Moreover, at least some representations touching the Ion Mat were on video or in the "ion mat product manual". As to reliance, it may be appropriate, if a sufficient number of Group Members give evidence of reliance and the respondents lead no evidence from members of the scheme of non-reliance, to infer, having regard also to the nature of the statements found to have been made, that they were made to, and relied upon by, all Group Members. While not making any findings at this stage, I consider it likely that the Group Members purchased the Ion Mat relying to some extent at least on some statements as to its health benefits and became members of the scheme in reliance on some statements as to its capacity to make money for them as a result of the introduction of new participants (a matter relevant to establishing a breach of subss 61(1) and (2A) of the TP Act). To adapt the reasoning of Drummond J in Council for the City of the Gold Coast v Pioneer Concrete (Qld) Pty Ltd, unreported, FCA, 9 July 1997, the case as presently pleaded by the ACCC in relation to reliance and inducement "is one which is by no means inherently improbable, but instead alleges outcomes that, prima facie, can be accepted as those likely to result from the various kinds of misconduct alleged against the respondents" (at 19).
Finally, Giraffe World and Mr Han submit that it is "inappropriate" that the matter proceed as a representative proceeding because, as noted earlier, the relief sought by the ACCC may be opposed to their wishes and interests. They submit that there is a "complete inconsistency in the interests of the Applicant who seeks restraint and the general membership who wish to continue [the scheme]".
There is no evidence as to the wishes of the Group Members. The evidence reveals only one complaint by a member of the scheme to the ACCC. I presume that the ACCC will pursue its application for injunctive relief whether or not the proceeding continues under Part IVA and whether or not the "general membership" opposes that course. If the ACCC succeeds, the business opportunity for which members paid will have come to an end, the question of the loss, if any, suffered by them will be capable of resolution, and the interest of loss suffering members will be in having an application for compensation made on their behalf. The suggested present "inconsistency of wishes" is related to the uncertainty as to whether there are at least six other Group Members mentioned earlier. I take into account the real possibility of a conflict between the wishes of the ACCC and those of the members of the scheme as a factor weighing in favour of the making of an order that the proceeding no longer continue under Part IVA.
Two further discretionary considerations favour the making of an order under s 33N. The first is that from 6 March 1998, Giraffe World, directly and through its solicitors, communicated and cooperated with the ACCC, furnishing it with documents and inviting it to attend its premises and observe its operation. Giraffe World submitted to the ACCC that its conduct does not contravene s 57 or s 61 and that it "promotes and markets its Ion mat by way of a multi-level marketing scheme where commissions payable to members are based on the genuine sale of its Ion mat, and not on mere introduction of participants". Giraffe World and Mr Han rely on a distinction drawn by the ACCC itself in its News Release apparently issued on 20 March 1993 "between pyramid sales, where commission is based merely or primarily on the introduction of new participants, and multi-level marketing schemes where commissions are made on the genuine sale of goods". The evidence suggests that through its solicitors Giraffe World has been frank and open in its dealings with the ACCC down to the time when the ACCC sought ex parte relief on 6 May.
The second discretionary consideration is that from their first appearance, relevantly, Giraffe World and Mr Han proffered undertakings to the Court directed against dissipation of assets, and, in particular, the removal of assets from Australia, and on 21 May they consented to Mareva injunctions in their ultimate form until the hearing of the proceeding or further order (see below).
There is prejudice to Giraffe World and to members of the scheme (perhaps many, perhaps few) if the proceeding continues under Part IVA. In particular, a notice affording Group Members the opportunity of "opting out" under s 33J of the FCA Act would inform readers of the existence of the proceeding and of the nature of the ACCC's allegations. This could have a disastrous effect on the scheme and on the interests of members of it. Notwithstanding my initial impression that the ACCC has a strong prima facie case of contravention of the TP Act, I would try to look for a solution which would avoid a shutting down of Giraffe World's business before there has been a final hearing on that issue.
It might be possible to give some protection by ensuring that the notice made clear that contravention has not yet been proved and that only one member has complained. However, even the allegation of illegality may cause members to cease introducing new participants.
There are two potential difficulties to be considered. The first is that, pursuant subss 87(1A) and (1B), the ACCC can seek only orders of the kind provided for by s 87. At present the ACCC also seeks orders on behalf of the Group Members under s 82. But given the scope of the orders available under s 87, this seems to pose no difficulty.
The second potential difficulty concerns the Mareva injunctions that are in force against the respondents. These were issued after the ACCC led evidence suggesting that substantial assets of Giraffe World and the second respondent had been transferred overseas. I emphasise that there may have been nothing sinister in this: Giraffe World's parent is a foreign corporation and the second respondent resides in the United States of America. If I were to order that the proceeding no longer continue under Part IVA, the proceeding would not, for the time being, include any claim for monetary compensation. Yet there is a real possibility that some individuals who bought the Ion Mat and joined the Giraffe Club and the Grow Rich System, if they had not suffered loss by 6 May, will have done so by the time when, if events so transpire, the ACCC moves in the proceeding for compensatory orders under subss 87 (1A) and 1B. The ACCC seems to have assumed that it would not, under any circumstances, be able to obtain Mareva relief on the basis of a prospective right to recover, and liability to pay, compensation; but see Securities and Investments Board v Pantell [1989] 2 All ER 673 at 677d. The issue was not the subject of debate before me. I have taken into account in favour of Giraffe World and Mr Tan their proffering of undertakings and consent to Mareva injunctions. In the circumstances, I would not be disposed to make an order under s 33N if the existing Mareva injunctions were not to remain in place.
Should the ACCC be required to give the usual undertaking as to damages? Giraffe World and Mr Han seek the discharge of those injunctions only if the ACCC does not give the usual undertaking as to damages. The ACCC submits that it should not be required to give that undertaking. It relies on two distinct grounds. They are to be found, respectively, in subs 80 (6) of the TP Act and in the practice according to which the Court does not require the Crown or an instrumentality of the Crown to provide an undertaking as to damages.
The undertaking as to damages was an invention of Knight Bruce LJ when he was Vice-Chancellor. It was at first intended to protect a defendant and the court where it later appeared that an ex parte injunction had been applied for improperly by reason of suppression or misrepresentation, but the court's practice of insisting on an undertaking was later extended to all cases in which an interlocutory injunction was sought by reference to the inability of the defendant to prepare his or her case properly because of the shortness of the time allowed: Smith v Day (1882) 21 Ch D 421 (CA) at 424 (Jessel MR). The giving of the undertaking assumes particular importance when one considers that, in the absence of one, damages are not available for any loss arising from compliance with the injunction, even though the defendant succeeds at the final hearing: Bond Brewing Holdings Ltd v National Australia Bank (No 2) (1990) 8 ACLC 403 (Vic/FC); Meagher, Gummow and Lehane, Equity: Doctrines and Remedies (3rd ed 1992) par [2181]. For this reason, it is usually said that "[a]lmost as a matter of course, a court will decline to grant an interlocutory injunction unless the plaintiff" gives an undertaking as to damages: Meagher, Gummow and Lehane, ibid; see also National Australia Bank v Bond Brewing Holdings Ltd [1991] 1 VR 386 (FC) at 559.
Against this background, I turn to the first ground relied upon by the ACCC. Section 80 of the TP Act provides, relevantly, as follows:
"(1) ...where, on the application of the Commission or any other person, the Court is satisfied that a person has engaged, or is proposing to engage, in conduct that constitutes or would constitute:
(a) a contravention of a provision of Part IV, IVA or V;
(b) attempting to contravene such a provision;
(c) aiding, abetting, counselling or procuring a person to contravene such a provision;
(d) inducing, or attempting to induce, whether by threats, promises or otherwise, a person to contravene such a provision;
(e) being in any way, directly or indirectly, knowingly concerned in, or party to, the contravention by a person of such a provision; or
(f) conspiring with others to contravene such a provision;
the Court may grant an injunction in such terms as the Court determines to be appropriate.
....
(2) Where in the opinion of the Court it is desirable to do so, the Court may grant an interim injunction pending determination of an application under subsection (1).
....
(3) The Court may rescind or vary an injunction granted under subsection (1) or (2).
....
(6) Where the Minister or the Commission makes an application to the Court for the grant of an injunction under this section, the Court shall not require the applicant or any other person, as a condition of granting an interim injunction, to give any undertakings as to damages."
The ACCC seeks final injunctions pursuant to subs 80 (1). As well, pursuant to subs 80 (2), it sought and was granted interim injunctions. But I am of the view that the Mareva injunctions currently in force are not "interim injunctions" within the meaning of subs 80 (6). In my opinion, the "interim injunction" referred to in subs 80 (6) is the interim injunction referred to in subs 80 (2). The power to grant interim injunctions given in subs 80 (2) is a power to do so "pending determination of an application under subsection 80 (1)" and in my view it is a power to do so in aid of, and in order to render effectual, a permanent injunction of a kind referred to in subs 80 (1). A Mareva injunction, on the other hand, is directed to preventing frustration, not of a permanent injunction, but of an award of monetary relief.
The power to grant the Mareva injunctions is therefore not to be found in subs 80 (2) of the TP Act. It is to be found in this Court's general power to make "interlocutory orders... as the Court thinks appropriate" granted by s 23 of the FCA Act: see Jackson v Sterling Industries Ltd [1987] HCA 23; (1987) 162 CLR 612 at 623. It follows that subs 80 (6) has no application to the Mareva injunctions in this case.
I turn to the second ground relied upon by the ACCC. It was held in Attorney-General v Albany Hotel Company [1896] 2 Ch 696 that an undertaking would not, as a general rule, be required where an interim or interlocutory injunction was sought by the Attorney-General. Although the decision in that case appears to have been based on a practice rather than on any legal rationale, it was subsequently considered that the reason for the exception was that the Crown was not liable in damages in an ordinary action and that relief against the Crown could be obtained only by a petition of right, and that to require an undertaking would be to encroach upon this immunity from liability: F Hoffmann-La Roche & Co AG v Secretary of State for Trade and Industry [1975] AC 295 (HL) ("Hoffmann-La Roche") at 351, 362. This rationale disappeared in England upon the passing of the Crown Proceedings Act 1947 . In relation to the Crown in right of the Commonwealth, comparable provisions are found in ss 56 and 64 of the Judiciary Act 1903 (Cth).
In Hoffmann-La Roche, the House of Lords held that the Crown should now be required to give an undertaking when applying for an interlocutory injunction "in an action brought against a subject to enforce or to protect its proprietary or contractual rights (jus privatum)". The House did hold, however, that an undertaking should not necessarily be required where the Crown sought an interim injunction in "law enforcement" actions. Lord Diplock explained the reason for this exception:
"When ... a statute provides that compliance with its provisions shall be enforceable by civil proceedings by the Crown for an injunction, and particularly if this is the only method of enforcement for which it provides, the Crown does owe a duty to the public at large to initiate proceedings to secure that the law is not flouted, and not simply to leave it to the chance that some relator may be willing to incur the expense and trouble of doing so." (at 364)
In that case, the Crown sought an interlocutory injunction requiring the defendant, a pharmaceutical company, to comply with the Regulation of Prices (Tranquillising Drugs) Order 1973 by not charging prices in excess of the prices specified in that Order. In fact, the Crown also had a substantial financial interest in the enforcement of the Order, as the pharmaceutical products in question were government subsidised. Nevertheless, the House held that an undertaking should not be required.
Hoffmann-La Roche was followed by Mason J in Commonwealth v John Fairfax & Sons Limited [1980] HCA 44; (1980) 147 CLR 39. In that case, the Commonwealth sought to restrain publication of certain material. His Honour held that, prima facie, publication would infringe the Commonwealth's copyright. He granted an interlocutory injunction, but on condition that the Commonwealth provide the usual undertaking as to damages, saying (at 59):
"As the Crown in right of the Commonwealth is not immune from suit or from liability in damages (see ss 56 and 64 of the Judiciary Act 1903 , as amended; Maguire v Simpson [(1977) [1977] HCA 63; 139 CLR 362]), there is no reason why a distinction should be drawn between the Commonwealth, at least when it seeks an interim injunction to protect a proprietary or private right, and a private citizen (see F. Hoffmann-La Roche & Co AG v Secretary of State for Trade and Industry ...). The court should in each case require an undertaking as to damages as a condition of granting an interlocutory injunction."
In the present case, the Mareva injunctions are in aid of private rights. Indeed, the rights in question are those, not of the Crown, but of private individuals. The ACCC submits that by bringing the proceeding under Part IVA, it is endeavouring to carry forward the policy of the TP Act. However, the only application which the ACCC could have a "duty" to make in order to ensure that the statute is enforced, is one for an injunction. Indeed, given the fact that any person has standing to seek injunctive relief, it is doubtful whether, consistent with the passage from the speech of Lord Diplock set out above, the ACCC has a "duty" even to apply for that form of relief. Although it would, in a general sense, fulfil the policy of the TP Act if Group Members obtained any compensation to which they may be held to be entitled in respect of any loss or damage caused to them by a contravention of the TP Act, this does not necessarily give rise to a duty incumbent on the ACCC to apply for such compensation on their behalf. There is nothing to suggest that the Group Members are incapable of bringing proceedings themselves, even though it would obviously be more convenient if their claims could be heard and determined together, and, better still, if they could be made and determined in the one proceeding.
In these circumstances, therefore, there is no reason why the ACCC should not be required to give the usual undertaking as to damages as a condition of the continuation of the Mareva relief.
CONCLUSION
In summary:
1. I doubt the correctness of Chats House and Golden Sphere on the issue of the standing of the ACCC to be a representative party in a proceeding under Part IVA, where, as here, its only "claim" is its statutory standing to seek relief in the public interest under ss 80 and 80A of the TP Act, but I will follow those decisions in the present respect as I do not think them clearly wrong.
2. In the exercise of my discretion, and by reference to all the discretionary considerations mentioned,
(a) I propose to make an order under s 33N that the proceeding no longer continue under Part IVA;
(b) If the ACCC does not give the usual undertaking as to damages, I propose also to discharge the existing Mareva injunctions.
The proceeding will be stood over to a date in the near future for the making of orders and directions consistent with these Reasons. The directions should provide for the future conduct of the proceeding, including an expeditious timetable directed to achieving as early a hearing on the issues of contravention and injunctive relief as the Court's commitments will permit.
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I certify that this and the preceding thirty nine (39) pages are a true copy of the Reasons for Judgment herein of the Honourable
Justice Lindgren |
Associate:
Dated: 14 July 1998
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Counsel for the applicant (respondent to the motion): | Mr R A Conti QC with Mr S White |
| Solicitor for the applicant (respondent to the motion): | The Australian Government Solicitor |
| Counsel for the first and third respondents (applicants on the motion): | Mr M J Neil QC with Mr N F Francey |
| Solicitor for first and third respondents : | Blessington Judd |
| Date of Hearing: | 21 May 1998 |
| Date last submission received: | 12 June 1998 |
| Date of Judgment: | 14 July 1998 |
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